tv Whatd You Miss Bloomberg September 29, 2016 4:00pm-5:01pm EDT
from the closing bell. mountingclining and concerns over deutsche bank as banks.s global i'm scarlet fu. joe: i'm joe weisenthal. scarlet: all major groups decline. joe: the question is "what'd you miss?" overet: a growing concern deutsche bank and 10 joe: hedge funds reduce exposure to the german lender. cosco earnings out in 10 minutes. we're looking at whether the visa except issue has led to more members. scarlet: columbia posco government signed a peace accord . we will get how the deal impacts the global economy. begin with our market minutes. the dow losing more than 180 points in all 11 industry groups finishing lower. energy was a the cusp of eking
couldn't. but just extending the gains on the opec decision. health care financials were the big laggard and we have to talk about deutsche bank. it is in the afternoon about potentially some hedge fund not wanting to do as much business with the bank sent markets into a tailspin. and dowsets and volume and s&p stocks above the 10 day average. joe: the s&p down not even 1% we were closer to about two thirds of a percent down. fairly close to the lows of the day. a record low for deutsche bank u.s. shares because the news came out after german trading ended. a number of funds that clear derivatives trade with true positions held at the firm according to an internal bank document. to thecern spread
financial sector. an etf that tracks all financials, you saw losses in goldman sachs and morgan stanley. i included wells fargo, down more than 2% as it was under pressure with the ceo testifying before the house financial .ervices committee today looking at the vix, you can see it is up once again. it did shoot up to 15.7 but came back down. the general trend has been a slow grind higher with occasional spikes. spike inking of the vix, that was off the deutsche bank's. you can see it here in u.s. 10 year yield. yieldfternoon, he saw the dive. people get nervous and grabbed for a life raft and that is what u.s. treasuries are.
indian long-term borrowing costs shooting up at the news overnight about an incursion into pakistan to take out some terrorists. a so-called surgical strike, but there is a dispute about that and you saw indian assets selloff. on tot: moving currencies, the yen was weaker for a third day. the size of the move was notable -- there are hopes higher oil prices will help the bank of japan achieve their inflation goal. yen not often you see the weaker along with risk currencies, but that is exactly what is happening now. random falling the most in three weeks. we are seeing a bit of an unwind that had boosted its value. declining versus the dollar and the aussie weakening against the dollar. the let's get a look at
commodity market, starting with intraday oil. it did gain following through someone on the rally yesterday, yesterday'sighs but big news seeing some followthrough that opec is going to cut. we saw that moving on the deutsche bank news. not moving much but the was a jump in the middle of the day, a flight for safety. scarlet: those are today's market minutes. let's take a deep dive into the bloomberg. news --e's some good the labor market continues to let solid. jobless claims have fallen to the lowest level since the year 2000. we usually look at the initial number but this looks specifically at the number of people who are continuing. at the lowest level
since 2000. if it goes lower, we will be at levels not seen since the mid-1970's. no signs of economic weakness on the layoff. matter how you slice and dice the jobless claims, it comes to the same. deutsche bank has been the company news story of the day and my chart tracks the number of options. you see that we have circled in red with deutsche bank stocks at a record low and traders using different stories to bet on the stocks and dividend outlook. we don't know where these beds are, whether they are bullish bets, calls, bearish bets or put. german officials have signaled they are not going to rescue the bank if needed.
bankinvestors see deutsche as a bargain. deutschectivity on bank options. insight's get some more into deutsche bank and what it means for the market and everything going on right now. for theu for joining us we see the market reacting to the ongoing weakness. how concerned are you and her much potential is there for this to spill over into the broader markets? guest: if it were ready to default by lehman, it would be a huge deal. when push came to shove, the government would have to get off. it seems shareholders don't want .o earn deutsche bank
it's not clear that you see the stresses and financial markets you normally associate with a major financial firm. normally there an asset that .ausing it you start to see a host of other prices start to move as the bank concern starts to liquidate assets and raise cash. there's no obvious sign of that right now. conditions in europe and u.s. are modestly negative, but nothing like the sorts of levels you saw in the buildup to bear, lehman or deutsche bank. is your best sign that it probably is not imminent. you did start to pull their
deposits from deutsche bank, it becomes serious quite quickly. it's an artificial crisis but it has the potential to become a real one. scarlet: we saw weakness in u.s. financial shares. earlier today when the news was breaking -- what was the thinking for why you want to dump goldman sachs or any of the financials? general sensitivity and opportunistic trading. it's not crazy to sell gold on the back of this kind of news and expect to make money later in the afternoon or tomorrow for the sort of stress we have seen in the buildup to a major financial company hitting the absent at this time. i'm not saying that means it is possible we could get there but you have to distinguish between goldman sachs being down a few percent off that -- off opportunistic trading and a buildup to the decline of bear
stearns and mf global. the posture of banks to make sure that plenty of liquidity out there? unlike 2008 or 2011, the central banks have done their fair share at this point in time. are more at the political level. it's not helpful for a government to dry line in the sand and say we would never go in if it was a crisis. they have the right to do so. they can govern in any way they want. when you spoke with your clients, did they call you in a state of worry? guest: nobody called me today. i don't think you've reached sinceoint. the s&p mid-september has been going up and down like a yeley of -- like a yo-yo. yesterday's close was
one s&p point. it's not yet what i would call newsworthy. it's not yet at the point where i think it dominating overall portfolio decision-making. joe: what is dominating big portfolio decisions? guest: is asia really getting ?etter is the chinese economy getting better and domestically, has the inflation cycle turn? the answer to both questions i would say is yes and yes i don't think it's got to the level where the market understands and what is not, but getting the news is really hitting analysis if you look at months, those seem to be the two big changes -- persistent sector service and much better turn to economic data. we sighed back up and
yields were people were getting into the government bonds. why is it that continuing? is to invest in income sensitive equities. we're here with another rush of portfolio allocations. it takes a great deal to create that kind of cycle. i think it is more than tactical. people think they're going to be in these traits for a very long time. i suspect they are wrong. i suspect by 2017 you will have a very different macro discussion taking late. i'm not surprised mid-september people looked at the move and said this is a buying option. have asked you this at some point. is it only a matter of time before markets are going to realizing nation is really here? maybe the fed is not going to
take this easy glide path out for a number of years and there will be a realization that it has changed? guest: it seems to be very dependent on commodity prices. it has not been higher than three 5% 20 years. service genuine u.s. sector inflation but does the flexible part of inflation which is mostly commodity driven in sectors like transportation if that starts to swing back, you will have significant headline cpi. for we will be watching that. thank you very much. from the, we will hear ihs market vice chairman and village of running -- pulitzer-winning author.
slightly weaker than expected but still higher than the same time last year, but not quite meeting analyst estimates. cosco beating on the bottom line but missing on the revenue line and that's a surprise since there was a lot of talk about heardoss margin might be as a couple he tries to maintain higher. stock ticking investors taking the results in stride. scarlet: we haven't confirmed that they have reported sales of $36.6 billion. the expectation was $36.9 billion. joe: opec ministers have agreed to cut production for the first time in eight years. what challenges will opec encounter when they try to implement this agreement? let's get some input from the ihs vice chairman.
to cut -- nocision one seemed to expect it. dan: quite a shock because it's not quite clear that it's really a cut or is it more like a freeze they're are going to do? saudi arabia would go down anyway. there are several challenges, one is how do you allocate whatever they do and it is notable countries are starting to say our production is higher than people think it is. second is the question about iran and how is that going to work. other question is russia, which is a wait and see. then there is the wildcard, that there is production coming from other countries. this huge field and cause extend delayed by many years is going to may be put 300,000 barrels a day of extra oil again by
november. russia you will see that is going to announce their production is at a record level. scarlet: there are a lot of issues that need to be sorted and we don't know what the allocation is for each country, yet there's a lot of symbolism in opec coming together to make this decision, since they had made no decision over the last couple of meetings. definitely ait's turn from where they were a list exactly two years ago when they the businessut of of trying to manage the market and we are going to let the market manage the market and now they are saying we will be partners with the market. was on that in algeria and they really wanted to see something come out of. there was some concern they had left them out of the room without an agreement to agree on something in the future. forward, the fact
that they were able to agree to anye on something more than specific level of they were able to find some unity here? dan: it's like the freeze last winter. it sent a message and there is some coherence. in particular, it's a challenge to people with short in the market and if they come out without an agreement, we could see five dollars come off the price of oil. put ahey have done is platform under the price of oil and suggested they could work something out and it may be an acknowledgment of reality that they ran cannot go to that many barrels a day. these obituaries for that which we have seen many times the last decade were too premature. it reminds me of foreign guidance from the fed, some
attempt to give a signal to traders in the market in hopes that would put a floor under things. scarlet: absolutely and you were ahead on this. it is like the fed job opening, threatening to make a change but not really having to follow through. we will see if they follow through. what is it for opec to actually come to a decision? is the bottom line at saudi arabia can't manage its finances without higher prices? dan: there certainly feeling the pressure. i think it is also that the saudi's are at a very high level, this is when their production starts to go down and there is a strong sense -- i remember thinking this last winter -- that nothing would happen until it is clear how high could iran get. maybe it could go up another
couple hundred thousand barrels a day, but that is it. i think the stakes were raised. this was not in opec meeting. it started out as an international energy forum to bring producers and consumers together and suddenly it turned into an opec emergency meeting. i think they realized if they left without doing something, that would be a downward movement in the oil price and revenues matter whether you are venezuela or saudi arabia with $500 billion of reserves, it matters right now and they are all feeling the pressure of joe: what is your assessment of the fiscal situation saudi arabia? see that the real peg may not hold due to the big deficits the company -- the country is running. how stable or saudi finances? dan: they have enormous reserves, around 500 billion dollars, the same reserves they
had in 2011. they are fighting a war that is costly in yemen but they made symbolic cuts and say we're tightening our belts on civil servants salaries and so forth. they are feeling the pressure in the growth rate is much slower, but the notion that their finances are perilous, if you have half $1 trillion of reserves, your finances are not perilous but they are very focused on the reforms in the economy and i think that's where their priority is. financial stability is important dan they are going to put more emphasis on that. they are not in a situation like nigeria or venezuela. they're very conscious of their bank account. how much our geopolitical issues playing into what happened? whether it's an override of president obama's veto of the
9/11 bill which if the house overrides it would allow u.s. individuals to sue the saudi , or whetheror 9/11 it is some kind of agreement between saudi arabia and iran? as you say, there are so many things going on at the same time. there's deep conflict and rivalry between saudi arabia and iran and that will persist long after a november opec meeting. i think the saudi's are shocked .y what happened with this bill as senator corker said, americans should have their day in court, but this was rushed through without any hearing. the letter president obama sent to the senate having devastating, that's the word he used, implications for u.s. military personnel and diplomats . that is on their mind and the saudi's are trying to assess what actually happens now because they are trying to do an ipo. they just put $3.5 billion into
the over. they are in the war on terror with us. this is going to be a dominating in saudi the next time and u.s. relations and makes a lot of things uncertain. the administration is really worried that americans will be sued by some prosecutor in pakistan or spain or something like that. at sovereign away immunity, we are the ones who are all over the world and the united dates is the most vulnerable. joe: let's go back to the overall market. silly questions, including non-opec supply. one of the oil bear arguments continues to be that any time we have an up tick in price, it's easy to get more production out of the u.s. what's your assessment of that? is it spare capacity that's not online but could get online and
put a ceiling on prices? dan: i don't think the u.s. is a swing producer. if you were around $50 a barrel, you will start to see activity. the u.s. is down to about 8.5 million barrels a day. we will see activity increase again and companies have become so much more efficient both in the united states and outside the united states. we just did a paper about how whathale oil survived and was a 60 or $80 range -- $60 or is now a $40 range. arabia,e big 3 -- saudi russia, and the u.s. and each marches to a different drummer. joe: do you see further deflation in the offing? you mentioned significant clients. his or more of that on the way?
dan: when i was in norway for their big oil event, they say they can produce in this big new field in the north sea for $25 a barrel. that tells you a lot of cost has come out. but what you're from service companies is they have given at the office and have no more to give. they are operating bare-bones, drivene costs cannot be down more. it is efficiency and technology. one of the things we are going to discover when the market starts to recover is how much capacity in the service industry has been lost during this price collapse. scarlet: what happens between now and november 30th when opec meets formally? one scheduled on november 30 -- what happens between now and then? do they hammer out all the details in terms of quota allocations?
dan: that's what they're supposed to do and it will be a lot of pressure on them to that and a lot of horsetrading going on. , you see the iraqi oil minister say our production is 4.7 million barrels a day. it's not going to be an easy negotiation, but at the end of the day, you probably get out of it what looks like a production cut that is really a freeze. joe: thank you very much for your insight. up, our coming exclusive interview with philadelphia fed president, patrick harbour. this is bloomberg. -- patrick parker. ♪
mark:mark: i'm mark crumpton. let's get to first word news. new jersey governor chris christie says one person was killed and more than 100 others injured in this morning's crash of a transit plane -- transit train as it entered the hoboken terminal. it crashed through a concrete and steel bumper at the end of the line in the historic 109-year-old terminal. governor christie: we know that this train came in at a high rate of speed into the station and crashed through all the barriers, bringing it right to the interior wall of the hoboken terminal. mark: governor christie says the
engineer is in critical condition but is cooperating with investigators. the national transportation safety board is it en route. president obama has signed a stopgap spending bill that keeps the u.s. government opened for business until the second week of december. congress approved a temporary .pending measure democrats agreed to go along once a separate measure was passed that included money for flint, michigan's contaminated water supply. dozens are missing in southeast china after a typhoon. more than a thousand residents have been evacuated and 1200 rescuers are on the scene frantically searching for survivors. at least five were killed and hundreds injured after the powerful storm hit taiwan. global news 24 hours a day powered by more than 2600 journalists and analysts in more 120 countries. i'm mark crumpton.
this is bloomberg. scarlet: let's get a recap of today's market action -- a selloff across the equity space. the dow jones losing 190 point but off its lows. volume heavier than usual. thanks for the big losers with concerns deutsche bank's problem with spread through the sector. also -- we were down around 220 at the low end up like we had come back. a pretty ugly day but all the s&p sectors down a bit. petlet: does the fed had a ability problem? that was just one of the questions post to patrick harker . patrick: if you have a model in the equation and put uncertain data in, you will uncertain judgment out of the other end. think of the things we measure like gdp and inflation. those revisions happen after we
have to make a decision. we have to a decision based on what we know today. a rule won't do a good job of that. we base it on q1 gdp numbers and they revised and get revised and we look back. important. very what we know to be fundamental errors in how we measure things that are inherently hard to measure. >> the fed possibility to -- as you came from the outside and have been on the job for about a year and sees what is happening at the fed, do you hang the central bank has a credibility problem, particularly with wall street about what is seeing and when? patrick: one of the fundamental
didlems we have had is we be. plot and the fed funds rate was taken as some sort of commitment by the fed as opposed to our best guess of what would happen. that has been a communications this, but it's not saying is what we are going to do. it is saying given what we know today, this is our best estimate of where that will be, assuming proper policy as follows. >> would you get rid of the dot plot as a modular? provide i think it does value and we need to think of lots of ways to communicate and be transparent. it's the interpretation of that dot plot. ourle understand that is forecast. the one i worry about is the fed funds rate dot plot. >> i would be remiss if i did not ask about inflation and
.here the fed is on her your president is often worried about higher inflation and the fed falling behind. would you agree or does the fed have more time? core inflation is moving toward the 2% target. when it comes to have my inflation, this is related to headline and other commodity prices. we see those increase, we see the 2% target and i'm convinced we are going to achieve that sooner rather than later. >> if you move in december, do you catch up? not yet. it depends on the path the economy takes. fed is going to meet. can you defend janet yellen and say this is a week before the
election, or are we talking about a nod and a wink here? patrick: every meeting is a life meeting. off theke any meeting table is a mistake. chargedhat has been with playing politics. how do you respond to that? >> i'm a relative newcomer. i finished nine meetings and that none of those meeting have i ever heard anything clinical. they'reay disagree but looking at the data through different lenses. , intellectual, what they have done in their own lives, we interpret the data in different ways and that's why the diversity is so important and having those different perspectives. in no case have i heard anyone state anything remotely political when they try to justify their decision. that was mike mckee
with an exclusive interview with patrick harker. what is your assessment of the fed? markets seem to think it is a coin flip on whether we will get a hike this year. think we will get one in december. i don't think november is live, but we have strong growth coming up in q3. these crazy soybean exports. it's going to be a different number and it will push the inflation to move. joe: is that a problem, that nobody thinks november is live in these non-press conference meetings are not political? guest: they can't win this time hike -- they can
really win. i think it is true that even the non-press conference ones, but this one, it's not like the inflation figures are screaming at them that you have to do something right now. case for raising interest rates is because there's no reason not to or a super compelling case that they must do it? it is becoming quite a powerful case. when they stepped away from these decisions, they have never changed their core view. requiresk that normalization and that has not changed. if anything, the fundamental market, thinkbor is it the end of the world, probably not. percent andaw brief
i think that will push into a move in december. the fundamental language hasn't change but the shocks have changed. another shock that could become bigger was deutsche bank and the problems there. a reason to hold office deutsche bank becomes a persistent worry and markets? guest: they would have to become a seriously acute case. think it will end up a ward of the german state. what's not going to happen is a lehman-like failure of deutsche bank. don't think it's going to be one of these things that stops them from moving if the domestic data tells them that they need to go.
we have seen oil prices intoup but does oil bleed core inflation through the back door? guest: a little bit. most of what we've got is in services. after several years of has been quiet and well behaved and has given the fed room for maneuver. health insurance premiums are at 9% year-over-year. ethical care is up 5%. becausea big problem there's a much bigger weight on the pce. caused a lot of deflation on the downside. a real threat because we've had this constant pressure under obamacare and now we see insurers pull out. they can't continue to raise
prices by 1% when their labor costs are rising at 2% or 3%. we are going to see this upside break and costs at the same time we've got big pressure in rents and rising wages pushing up a whole other array of services. anything.ling to see scarlet: why are inflation expectations arising with it? guest: because they tend to focus on a headline rate. what you're going to see, if that happens the same time we see a pickup in the core, you'll have a lot of people sitting at their spreadsheets and saying these expectations embedded into markets are too low. joe: founder and chief economist at pantheon macro economics, thank you very much. columbia's road to peace has just begun.
joe: "what'd you miss?" columbia president signed a peace accord with the rebel group known as farc. this comes after years of negotiations and hence -- and and more than half a century of conflict. for more on the obstacles and opportunities have come we are joined by a latin american analyst at eurasia group. she's based in london. thank you for joining us. explain the significance of this agreement and what is next for it to come into force. i think the peace deal
comes in three main prongs. first is security. security has improved over the of ayear as a result cease-fire that fark has complied with. agreement would witht the security gains the level of violence related to this conflict. has to do with policymaking and this is quite important for market. the government has been delaying tax reforms to compensate for the revenue and it would allow the administration to redirect
resources in areas that have been put on hold. reform tolow a tax compensate for the loss of oil revenue. joe: talk to us about the couldic ways getting this change the trajectory of columbia's economy guest:. with respect to the impact that going to have on the economy, it is less clear in the short term. government has been .pportunistic i more cautious about the
short-term impact and i think going to be up 50% but that's going to be felt in certain areas that suffer the most from the conflict and most gains are going to come over the long-term. it has to do with the redirection of public resources. it's very high. it will take time to materialize because columbia still faces security challenges due to the andence of other groups criminal bands in grade -- engaged in similar activities. what is on the government must fiscal agenda right now?
what does it have to do in terms of taxes and spending to hit its goals? since the decline of theys started in 2014, have a wider deficit higher ands for companies in 2014 by an acting spending cuts, and postponing tax reform. in colombiaular because they didn't want the peace agreement to come at the as the debate on taxes. now that the peace deal has been the government, in order
scarlet: "what'd you miss?" hillary clinton's quest to lower millennials. hillary clinton is struggling to people as excited about her campaign as they were about bernie sanders or president obama. for more, let's head to our bloomberg politics reporter who wrote a story about this today. aside from tweets and internet meme's, what's her strategy to attract millennials? guest: she's bringing out character witnesses who are popular to make the case for her and not just against trump. the issue there is millennials don't like trump and are considering voting for a third-party candidate or not voting. so she is bringing up bernie sanders, enlisting the president and first lady and elizabeth moran, figures -- elizabeth warren, figures who are much casepopular and make the that she would fight for them on
issues that matter like college affordability and racial justice. ultimately, hillary clinton doesn't need a millennials to be excited, she just needs them to show up and vote for her even if they are unexcited. is it clear that even if they are not excited that they will show up? is it possible they will show up in plenty of numbers, just unenthusiastically? guest: that's possible. and unenthusiastic vote counts just as much as an enthusiastic vote. it's going to be a grind at the end. they will do blocking and tackling with young voters. at the end of the day, it's about turning out as many people as you can. it's going to be about making sure they understand the stakes in this election -- that the things they care about hang in the balance or that trump is going to move the country in a direction that's going to be
abhorrent to them. they are also arguing that it is her or trump. you heard the president argued yesterday that a vote for a third-party candidate or a decision not to vote ultimately amounts to a vote for trump, so they will be pressing this case and looking at the 2000 election as well, which is an object lesson in third-party voting. one place where hillary clinton is with women voters. to talkp team continues about his comments about the weight of the miss america winner and i think it is thursday, so it three days later and they are still -- there are still headlines about the story. why have they been so bad about letting that go? speaks to the whole undisciplined, free-for-all nature that pervades the trump campaign, especially in difficult moments. see how having this conversation helps them in any
way, but he's already doing suburbanong women and women, college educated white women in particular are a major constituency that tends to vote republican. the first time since the 1940's, they are seriously leaning toward a democrat in this election because of trump's history of these kinds of sexist comments. scarlet: let's contrast that with hillary clinton's campaign which has been notching up endorsements from republicans. do those matter at all in this kind of campaign where so many unconventional rules apply or conventional rules don't apply? .uest: the short answer is no republicans have been coming out for hillary clinton in an torecedented way compared
previous elections, prominent figures. and trump's numbers keep going up. about as well as republicans as hillary as hillary clinton is doing with democrats. the republican base doesn't care what the republican elite has to say. they are discredited among this electorate. what youcoming up, need to know before gearing up for tomorrow's trading day. this is bloomberg. ♪